Mortgages

The CFPB has made available a beta version of its 2018 HMDA data platform. The platform is for the reporting of data collected in 2018 that must be reported in 2019.

During the beta period, reporting institutions can test and retest 2018 HMDA data files as often as desired to assess if their Loan Application Register (LAR) data complies with the reporting requirements outlined in the Filing Instructions Guide for HMDA data collected in 2018.

No 2018 data can actually be submitted through the platform until January 2019. Based on the substantial changes to HMDA data for 2018, testing whether LAR data complies with the reporting requirements will likely be beneficial for many reporting institutions.

The CFPB recently filed a complaint and a proposed stipulated final judgment and order to address claims that Village Capital & Investments LLC (Village) engaged in deceptive acts and practices in the solicitation of veterans for mortgage refinance loans to be guaranteed by the Department of Veterans Affairs (VA).

The CFPB asserts that between March 2017 and August 2018 Village employed loan officers in its San Antonio, Texas office who were responsible for making in-home sales presentations to veterans for VA Interest Rate Reduction Refinancing Loans to be made by Village. This type of loan is the VA version of a streamlined refinance loan that is primarily intended to provide a veteran borrower with a lower interest rate and monthly payment. The CFPB states that Village provided the loan officers with marketing materials for the in-home presentations, including a worksheet that would be used to compare the veteran’s current loan with a proposed refinance loan.

The CFPB asserts that that the worksheets were deceptive because they misrepresented the cost savings to the consumer of the refinanced loan by:

Inflating the future amount of principal owed under the veteran’s existing mortgage loan by underestimating the proportion of the consumer’s existing monthly payment that is applied to principal.

Underestimating the future amount of the monthly payments on the proposed refinance loan by overestimating the term of the loan.

Overestimating the total monthly benefit of the proposed refinance loan after the first month.

Without the adjudication of any issue of fact or law, to settle the matter Village agreed to pay $268,869 for the purpose of providing redress to affected consumers, and also agreed to pay a civil penalty of $260,000. Village further agreed not to misrepresent to consumers in connection with the offering of refinance loans (1) the future principal or future monthly payments owed on the consumer’s existing mortgage loan, or (2) the future principal or future monthly payments a consumer would owe on a refinance mortgage loan. Additionally, Village must develop a compliance plan that includes training for loan officers.

As previously reported, the National Flood Insurance Program was scheduled to expire on November 30, 2018 and Congress extended the Program to December 7, 2018. The US House of Representatives and US Senate have once again voted to temporarily extend the Program, this time until December 21, 2018. Perhaps Congress is hoping that someone will come down the chimney and deliver a long-term, sensible reform of the Program.

As previously reported, the National Flood Insurance Program was scheduled to expire on November 30, 2018. Once again, Congress has kicked the can down the road by authorizing a temporary extension of the Program, rather than adopting a long-term, sensible reform of the Program. This time the kick was short, as the extension is only until December 7, 2018.

The FDIC, Federal Reserve Board and Comptroller of the Currency are proposing a rule to implement a rural property appraisal exemption under the Economic Growth, Regulatory Relief, and Consumer Protection Act (the Act) and also increase the appraisal exemption based on transaction value from $250,000 to $400,000.

As we reported previously, the Act amends the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) to exclude a loan made by a bank or credit union from the FIRREA requirement to obtain an appraisal if certain conditions are met. The conditions are that the property is located in a rural area; the transaction value is less than $400,000; the institution retains the loan in portfolio, subject to exceptions, and; not later than three days after the Closing Disclosure is given to the consumer, the mortgage originator or its agent has contacted not fewer than three state-licensed or state-certified appraisers, as applicable, and documented that no such appraiser, as applicable, was available within five business days beyond customary and reasonable fee and timeliness standards for comparable appraisal assignments, as documented by the mortgage originator or its agent.

The federal banking agencies propose to implement the exemption under the Act by simply adding to the list of exempted transactions in their respective appraisal regulations a transaction that “is exempted from the appraisal requirement pursuant to the rural residential exemption under 12 U.S.C. 3356.” In short, the agencies will implement the exemption by simply referencing the statutory provision.

Significantly, the agencies also propose to increase the exemption based on the value of a transaction from $250,000 to $400,000. The agencies advise that the decision to propose an increase in the transaction value exemption is based on consideration of available information on real estate transactions secured by single 1-to-4 family residential property, supervisory experience, comments received from the public in connection with the Act, and rulemaking to increase the appraisal threshold for commercial real estate appraisals. If this proposed exemption is adopted, it will significantly reduce the importance of the rural property exemption added by the Act.

With both proposed exemptions, banks still would need to obtain an appropriate evaluation of the real property collateral that is consistent with safe and sound banking practices.

The comment period will run 60 days from the publication of the proposal in the Federal Register.

With the November 30, 2018 expiration date for the National Flood Insurance Program (Program) looming, industry trade groups sent a letter to Congressional leaders urging Congress to extend the Program.

As we reported previously, the Program was set to expire on July 31, 2018 and Congress voted on that date to extend the Program until November 30, 2018. Basically Congress kicked the can down the road until after the midterm elections.

As noted by the trade groups in their letter “Congress has yet to pass a long-term extension of the NFIP, as debate continues regarding options for reforming the program. This has already resulted in a series of seven stop-gap extensions and two brief lapses in 2017 and 2018. The NFIP is currently the main source of flood insurance in the United States, and Americans deserve certainty and stability in the flood insurance marketplace to be able to protect their homes and loved ones.”

A long-term, sensible reform of the Program is long overdue. The continued kicking of the can down the road by Congress through temporary extensions of the Program is not good policy for communities at risk or taxpayers.

The CFPB recently issued revised versions of the small entity compliance guides for the Loan Originator Rule and the Home Ownership and Equity Protection Act (HOEPA) Rule.

While some of the most well-known provisions of the Loan Originator Rule are the provisions addressing loan originator compensation, the rule also defines the concept of a loan originator and addresses qualification and other requirements related to loan originators. Among various changes, the guide for the Loan Originator Rule is revised to reflect (1) the broadening of an exemption from the concept of a loan originator with regard to retailers of manufactured and modular homes and their employees made by the Economic Growth, Regulatory Relief, and Consumer Protection Act (Act), which was adopted earlier this year (2) the process for contacting the CFPB with informal inquiries about the rule, and (3) that the TILA/RESPA Integrated Disclosure (TRID) rule is now in effect (the prior version of the guide was issued in March 2015 and the TRID rule became effective in October 2015).

Among various changes, the guide for the HOEPA Rule is revised to reflect (1) the broadening of the exemption from the concept of a loan originator made by the Act (which is noted above), as this can affect the requirement to include loan originator compensation in points and fees for purposes of the points and fees threshold under the HOEPA rule, and (2) the process for contacting the CFPB with informal inquiries about the rule.

Note that for purposes of the points and fees cap to determine qualified mortgage loan status under the ability to repay rule, the definition of “points and fees” set forth in the HOEPA rule is used. As a result, corresponding changes likely will be made to the provisions of the small entity compliance guide for the ability to repay rule to reflect that the Act’s broadening of the exemption from the concept of a loan originator with regard to retailers of manufactured and modular homes and their employees may affect the calculation of points and fees for qualified mortgage purposes. The current version of such guide was issued in March 2016, and the version of the guide on the CFPB’s website includes a notice that the guide has not been updated to reflect the Act.

A number of housing and financial industry trade groups, including the Mortgage Bankers Association and Real Estate Services Providers Council, Inc. (RESPRO®), recently sent a letter to Senators Mitch McConnell (R-KY) and Charles E. Schumer (D-NY) supporting the confirmation of Kathleen Kraninger as CFPB Director.

The trade groups state that Ms. Kraninger “has the ability to lead and manage a large government agency, like the Bureau, which is tasked to ensure consumers’ financial interests are protected,” and “also fulfill the equally important role of ensuring businesses have the necessary compliance support to further those interests.”

Addressing concerns regarding the CFPB, the trade groups state “Our members believe the Bureau must improve its examination, enforcement, rulemaking and guidance processes to assist with regulatory compliance and bring certainty in the marketplace. As evidenced during the Senate Banking Committee confirmation hearing, Ms. Kraninger’s testimony conveyed a commitment to such actions along with a thoughtful review of the law for corresponding administrative actions.”

As we reported previously, the Senate Banking Committee voted to approve Ms. Kraninger’s nomination as CFPB Director, but the full Senate has not acted on the nomination. If the Senate does not act on Ms. Kraninger’s nomination during the lame-duck session, the nomination will be returned to President Trump. Once the new Congress convenes next year, the President could re-nominate Ms. Kraninger or nominate another individual for CFPB Director. As we reported previously, under the Federal Vacancies Reform Act Mick Mulvaney can continue to serve as Acting CFPB Director for a 210-day period if Ms. Kraninger’s nomination is returned or rejected, and once another nomination is made he could serve as Acting Director during the Senate’s consideration of the second nomination.

The CFPB and Federal Housing Finance Agency (FHFA) have released the first public use file containing data from the National Survey of Mortgage Originations. The NSMO is a component of the National Mortgage Database (NMDB®) program, which we reported on previously.

Since 2014, the CFPB and FHFA have sent approximately 6,000 surveys each quarter to consumers who recently obtained mortgage loans to obtain feedback on their experiences during the origination process, their perception of the mortgage market and their future expectations. The recently issued public use file reflects data from the first 15 quarterly waves of surveys, and covers nearly 25,000 loans originated from 2013 to 2016.

Letters are sent to consumers randomly selected for the survey in both English and Spanish, and consumers who elect to complete a survey may do so in English or Spanish. The current version of the survey contains 94 questions. Topics addressed by the questions include the shopping process, factors regarding the consumer’s selection of the mortgage lender and mortgage loan, the application process, satisfaction with the lender and origination process, whether the consumer experienced certain issues at the loan closing (such as whether the loan documents were not ready or whether the consumer felt rushed or was not given time to read documents), information regarding the consumer (including demographic and income data), whether the consumer expects changes in household income or expenses, whether the consumer expects any changes in employment status, and transaction details (such as purpose for the loan, down payment amount, sources of funds for down payment, factors influencing decision to refinance, interest rate and whether rate is fixed or adjustable, parties who contributed to the payment of closing costs, the type of property and other property details).

FHFA Deputy Director Sandra Thompson stated that “The goal of the survey is to obtain information to help improve lending practices and the mortgage process for future borrowers.” CFPB Acting Director Mick Mulvaney stated that “These data will allow greater transparency, accountability, and effectiveness around borrowers’ mortgage experiences.” The surveys are intended to address the FHFA obligation under the Housing and Economic Recovery Act to conduct monthly mortgage surveys of all residential mortgages, and the CFPB obligation under Dodd-Frank to monitor the primary mortgage market, including through the use of survey data.

The CFPB recently issued a revised version of the Home Mortgage Disclosure (Regulation C) Small Entity Compliance Guide to reflect a partial exemption to Home Mortgage Disclosure Act (HMDA) requirements made by the Economic Growth, Regulatory Relief, and Consumer Protection Act and a related interpretive procedural rule issued by the CFPB. Pursuant to the partial exemption, depository institutions and credit unions are exempted from the new HMDA reporting categories added by Dodd-Frank and the HMDA rule adopted by the CFPB with regard to (1) closed-end loans, if the institution or credit union originated fewer than 500 such loans in each of the preceding two calendar years, and (2) home equity lines of credit (HELOCs), if the institution or credit union originated fewer than 500 HELOCs in each of the preceding two calendar years.

There also are revisions that are not related to the partial exemption. Section 4.1.2 is revised to clarify loans that are not counted when determining if an institution’s lending volume triggers HMDA reporting. The table in Section 5.8 of the Guide regarding the loan amount reported is revised for (1) counteroffer situations when the applicant did not accept or failed to respond to the counteroffer and (2) situations in which an application is denied, closed for incompleteness or withdrawn.

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